Below is an excerpt from the case:

Nancy Meyer was the victim of fraud when her live-in fiancé stole convenience checks from two of her credit cards and forged her signature to cash those checks. The question presented in this motion is whether defendant F.I.A. Card Services, N.A. (“FIA”) has shown its investigation into that fraud was reasonable such that, as a matter of law, it met its obligations under the Fair Credit Reporting Act when Meyer alerted it to the fraud. Since FIA knew the nature of the fraud and had specific requests from credit reporting agencies (“CRAs”) to verify the signatures on the checks, which it did not do, the Court finds that FIA has not made such a showing and denies FIA’s motion for summary judgment.

Meyer v FIA Card Services (D. Minn., Civil No: 09-2726)

Advanced Management Services

The FTC charged that Advanced Management Services NW LLC, and several co-defendants called consumers and claimed that they could negotiate with credit card issuers to substantially lower the consumers’ credit card interest rates. They allegedly delivered prerecorded “robocalls” with messages urging consumers to “press one” to speak with someone. Many consumers believed the calls came from their credit card company. The defendants charged consumers up to $1,590 and promised a refund if they failed to deliver at least $2,500 in interest rate savings. But, instead of arranging reduced interest rates, the defendants sent consumers instructions to pay down their credit card debts early to save money on interest. Consumers who demanded refunds allegedly were denied outright, got the run-around, or had a $199 “nonrefundable fee” deducted from their refund.

Under two settlement orders, all of the Advanced Management Services defendants are banned from selling debt relief services. The defendants, who were based in Washington and Texas, are also prohibited from misrepresenting material facts about any good or service, selling or using customers’ personal information, failing to properly dispose of customer information, and collecting payments from their debt relief customers.

The order against PDM International Inc., also doing business as Priority Direct Marketing International Inc., and William D. Fithian, also bans them from telemarketing and from violating the FTC’s Telemarketing Sales Rule, and imposes a $13.8 million judgment. The order against Advanced Management Services NW LLC, also doing business as AMS Financial, Rapid Reduction Systems, and Client Services Group; Rapid Reduction System’s LLC; Ryan David Bishop; and Michael L. Rohlf; imposes an $8.1 million judgment. Both judgments, which represent the total amount of money consumers lost, will be suspended when the defendants have surrendered virtually all of their assets, including several luxury cars, a boat, jet skis, and ATVs. The full judgments will become due immediately if the defendants are found to have misrepresented their financial condition.

The FTC acknowledges the assistance of the Better Business Bureau of Eastern Washington, North Idaho, and Montana, and the BBB of Fort Worth, Texas; the U.S. Postal Inspection Service; the Bedford, Texas, Police Department; and the attorneys general of Illinois, Minnesota, North Carolina, North Dakota, Washington, and West Virginia.

Dynamic Financial

In a second case, the FTC alleged that Dynamic Financial Group and other defendants told consumers that, for an up-front fee of up to $1,995, they could save consumers thousands of dollars by reducing their credit card interest rates, and help them pay off their debts faster. The FTC further charged that the defendants promised, falsely, a full refund if consumers did not save a “guaranteed” amount – typically $2,500 or more. However, the defendants allegedly did not negotiate lower interest rates for consumers or failed to provide refunds.

Under five settlement orders in this case, all of the defendants are banned from selling debt relief services. These defendants, who are based in Canada, Florida, and New Jersey, also are prohibited from misrepresenting material facts about any good or service, violating the Telemarketing Sales Rule, collecting payments from their debt relief customers, using or selling customers’ personal information, and failing to properly dispose of customer information.

The order against 2145183 Ontario, Inc., also doing business as Dynamic Financial Resolutions Inc.; The Dynamic Financial Group (U.S.A.) Inc.; R&H Marketing Concepts Inc.; America Freedom Advisors Inc.; Joseph G. Rogister; and Christopher M. Hayden also bans them from robocalling and imposes an $8.3 million judgment that will be suspended due to the defendants’ inability to pay.

The order against Thriller Marketing LLC, Dwayne J. Martins, and John L. Franks Jr. imposes a $4.9 million judgment that will be suspended when Martins has surrendered the proceeds from selling a 2005 BMW 645 and Franks has surrendered the proceeds from selling two business condominiums in Tampa. The order against Frank Porporino Jr. also bans him from robocalling and imposes an $8.3 million judgment that will be suspended when he has surrendered certain assets. In each instance, the full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.

The orders against Michael Falcone and Sean Rogister also ban them from robocalling and impose judgments of $93,137 and $90,473, respectively, which must be paid immediately.

On April 27, 2011, a default judgment was entered against Alpha Financial Debt Group Inc. That order imposed a $8.68 million judgment and banned the company from robocalling. Litigation will continue against the remaining defendant, Philip N. Constantinidis.

The Commission vote approving the Advanced Management Services proposed consent judgments was 3-1-1, with Commissioner Rosch dissenting and Commissioner Brill recused. The FTC filed the proposed consent judgments in the U.S. District Court for the Eastern District of Washington. The court entered the consent judgments on April 27, 2011, and May 3, 2011. The Commission vote approving the Dynamic Financial proposed consent judgments was 5-0. The FTC filed the proposed consent judgments in the U.S. District Court for the Northern District of Illinois, Eastern Division, where they were entered by the Court on April 27, 2011.

Law enforcement organizations at the international, federal, state, and local levels provided valuable investigative assistance in bringing this action. The FTC would like to thank the following for their help: The U.S. Postal Inspection Service; the Florida Department of Agriculture and Consumer Affairs; and the Toronto Strategic Partnership, which includes as member agencies the Competition Bureau Canada, the Toronto Police Service Fraud Squad – Mass Marketing Section, the Ontario Provincial Police Anti-Rackets Section, the Ontario Ministry of Consumer Services, the Royal Canadian Mounted Police, and the United Kingdom’s Office of Fair Trading. Valuable assistance also was provided by the Better Business Bureaus of Central, Northern & Western Arizona; San Diego; and Metropolitan New York.

“We’re identifying lending industry situations in FICO Score Trends that to our knowledge have never been seen before,” said Dr. Mark Greene, CEO of FICO, in a statement. “Economic instability is creating unknown risk in lenders’ credit portfolios as well as counter-intuitive trends in consumer behavior.”

The shift to a consumer preference to stay current on unsecured debt, as opposed to secured debt, began last year. In 2009, 0.3 percent of consumers with FICO scores between 760-789 defaulted on real estate loans, compared to 0.1 percent who defaulted on credit cards. In 2005, credit card delinquency risk was three times greater than today. In 2008, the lower to credit cards being just 1.6 times more likely to become 90 days delinquent than were mortgage loans.

The results echo data released by credit info provider, TransUnion, earlier this month. That study from earlier this month, found the share of borrowers who are delinquent on their mortgages but current on their credit cards rose to 6.6% as of Q309 (from 4.3% in Q108). At the same time, the share of borrowers that are delinquent on credit cards but current on their mortgages slipped to 3.6% from 4.1%.

Capital One Bank (USA) is a national bank headquartered in Glen Allen, Virginia. It has about 500,000 credit card accounts with West Virginia consumers. Capital One Services, LLC, Capital One Services II, LLC, Capital One Services III, LLC, and COSI Receivables Management, LLC are Delaware corporations that service and collect on the credit cards issued by Capital One Bank.

The complaint filed in Mason County is based on numerous violations of West Virginia’s consumer protection laws. The complaint alleges that Capital One solicited consumers to enter into debt repayment plans by sending them solicitations that were disguised as offers of new credit. The offer was sent to consumers who had charged-off accounts with Capital One or other creditors. Under the terms of the offer, Capital One agreed to provide the consumer $1.00 of new credit in exchange for the consumer’s agreeing to transfer the entire account balance of a charged-off account to the new credit card account. The consumer was required to make payments on the old debt in order to receive any further increases in the credit limit on their new credit card.

By transferring the old debt onto a new credit card, Capital One was able to charge interest, late fees, and over-the-limit fees on debt that otherwise would not have been subject to those fees. It also allowed Capital One to re-age the debts so that the applicable statute of limitations period started new.

The complaint also alleges that Capital One: issued multiple low-limit credit cards, each charging exorbitant fees, rather than raising credit limits on consumers’ existing accounts; unconscionably imposed over-the-limit fees on consumers’ accounts; sold services to consumers who could not benefit from the services; and, billed and attempted to collect for credit card accounts that were never activated.

Attorney General McGraw stated, “Capital One’s practice of offering nominal extension of credit, if and only if, the consumer agreed to pay off a debt too old to be sued on is tantamount to loan sharking.” Until recently, the Attorney General was under a federal court injunction that prohibited him from suing the bank for its credit card practices; however, on January 4, 2010 United States District Court Judge Robert Goodwin granted the Attorney General’s motion to modify the injunction. Under the new order, the Attorney General is not prohibited from suing the bank to enforce non-preempted substantive state laws.

For more information or to file a complaint, please contact the Attorney General’s Consumer Protection Division. Call 1-800-368-8808, write to P.O. Box 1789, Charleston, WV 25326-1789, or visit his website at wvago.gov.

Confused, she called the customer service line on the back of the card, issued by Citibank, and was told the account was closed because of something that appeared on her credit report. But when the Sykesville, Md., resident got a copy of her credit report online, the only negative thing she saw was “closed at credit grantor’s request” on the Shell MasterCard account.

“They said there was a routine review,” said Burdette, who maintained that she and her husband, Brian, used the card regularly and always paid the bill on time.

Burdette isn’t alone. People across the country have been reporting similar experiences in postings on various consumer Web sites.

Citi confirmed the basics. The bank said in a statement it “decided to close a limited number of oil partner co-branded MasterCard accounts.” That includes not only Shell, but Citgo, ExxonMobil and Phillips 66-Conoco cards.

The close date was Wednesday, and letters were sent out Monday to customers informing them of the change, a Citi spokesman said. The bank would not say how many cards were shut down or how much available credit they represented.

But unlike the bank’s move to shut down its Home Depot cards, Citi did not discontinue the sale of these cards altogether. It is still accepting applications, promising rewards like 3 percent cash back on fuel purchases and 1 percent cash back on other spending.

No law, including the Credit CARD Act that has started to take effect, prevents banks from closing down credit accounts without warning. Credit card issuers all maintain the right, typically listed in the fine print on credit card agreements.

Citi would not say why the cards in question were shut down, issuing a statement that said only it continuously evaluates its products.

“It is kind of an extraordinary action, but these are extraordinary times,” said Ben Woolsey, director of marketing and consumer research for CreditCards.com.

He noted that Citi is not the healthiest bank. In fact, Citi posted $8 billion in consumer credit losses for its third quarter last week, including both mortgages and credit cards. Like many banks with big consumer lending portfolios, Citi is expecting defaults on credit cards to rise in coming months. Credit card delinquencies typically track the unemployment rate, which is at 9.8 percent and is expected to top 10 percent soon.

Analysts noted following the earnings report that Citi has sharply reduced its outstanding credit to consumers.

A card being closed may, but does not always, damage a person’s credit score.

Such scores, which lenders use to determine if you’re a good credit risk, take into account a series of factors, including how long you’ve had credit accounts, your payment history and the balance versus available credit.

It could be that last factor that hurts consumers most, said John Ulzheimer, president of educational services for Credit.com. If a consumer had a high credit limit on the closed account, and that credit is no longer available, it could alter the “utilization ratio” for the person’s remaining credit. If another type of credit carries a high balance, the loss of the credit line could push down their score.

Ulzheimer said banks have been routinely making such moves in the past year and a half, mostly on a case-by-case basis. “Every once in a while you’ll get a huge pop in one particular card product,” he said.

Card holders who think their cards were unfairly shut down can try to contact the bank and ask for reinstatement, but Ulzheimer didn’t hold out much hope for success. “In this environment,” he said, “it’s not as successful as it was in the heyday of credit cards, where you could in fact call and plead your case.”

I asked to keep the first one open with $5000 and the other transferred to the new card.  Imagine my surprize when I got several credit alerts on my credit monitoring of my 853 going to 830.  Well, the new card came and it was $5000 and the old card was also reduced to $5000!  New card only good for cash advances and balance transfers. 

I called to find out what was going on and they said that due to the banking industry, all banks were doing this!  I told her that I have a federal job, paying $60,000 yr/no prospect of being laid off, paid off house and cars, so why was I a risk???? 

Told them to cancel the new card and put the rest back on the higher interest, but longer established card.  I’m hopping mad.  Is this truly a new banking thing or did they just pull a fast one on me?  I’m so mad, I would like to close out the card!  I liked to know I had the high balance “just in case” of emergency.  Didn’t this just lower my score?  She said no.  I think it is BS. 

Your opinion????  Thanks for all your good advise!

Gayle

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Hi Gayle,

By and large credit that a borrower qualified for in times past will have a higher credit limit than that which the same borrower (with the same income/credit score) would qualify for today.  So, in general, expect that the bank might lower a credit line given that the door was open to reevaluate.

One big change that did go into effect recently was the Credit Cardholder’s Bill of Rights of 2008 which did force banks to change the way they deal with consumers – the net affect of which is an overall reduction in credit.

Thanks for the questions and hope this helps.

Paul

Arbitration, critics say, typically favors businesses over consumers. And it’s not worth most people’s time to arbitrate nickel-and-dime issues that could be more practically dealt with in court.

So it was big news recently when Bank of America announced it would be the first major financial institution to no longer require that disgruntled credit card, banking and loan customers arbitrate any grievances.

Most media outlets characterized BofA’s move as good for consumers and bad for the bank’s lawyers, who now face a deluge of lawsuits.

Apparently it didn’t occur to any of them to ask whether scrapping the arbitration requirement also meant BofA was doing away with its prohibition on customers joining class-action lawsuits.

I did. And it hasn’t.

So although BofA’s decision means you no longer are forced into arbitration, you still can’t team up with other customers who have the same complaint and sue the bank.

You’ll have to fend for yourself, paying any legal expenses and dealing with any hassles. And that assumes you could even find a lawyer willing to take on a case involving what most would deem pocket change.

“Dropping the arbitration requirement is a useful step, but it’s only a half-step,” said Gail Hillebrand, a senior attorney with Consumers Union. “They still want the ability to ban customers from banding together.”

Class-action lawsuits are frequently abused by plaintiffs and attorneys whose only goal is to walk away with a share of some fat settlement.

But they’re also arguably the best tool many consumers have to address problems involving relatively small amounts of money. Individual lawsuits, even in Small Claims Court, can often cost more to resolve than the amount under dispute.

Betty Riess, a BofA spokeswoman, told me the bank still believed arbitration was a fair and efficient means of resolving disputes.

“But we have heard that some customers have not experienced the anticipated benefits of arbitration,” she said. “So we decided that it would be best for customers, and best for the bank, to discontinue the practice.”

Actually, most observers think BofA was responding to a decision last month by the National Arbitration Forum, the biggest provider of arbitration services, to stop handling credit card disputes.

The organization was sued by Minnesota’s attorney general for alleged fraud, deceptive trade practices and false advertising because it allegedly hid its financial ties to the very credit card companies whose disputes it was handling. The American Arbitration Assn. also said it would stop arbitrating consumer debt collection.

“Bank of America didn’t want to get sued too,” said Hillebrand, adding that other banks are expected to follow BofA’s lead in dropping arbitration provisions in their contracts.

When I asked BofA’s Riess whether the bank had scrapped its prohibition on customers joining class-action suits, it took several attempts before she could muster a straightforward response.

“We aren’t addressing the class-action waivers as part of this decision,” she finally said. “We will preserve the class-action waivers in our agreements.”

So what should customers do?

“We would hope that people would just deal with us directly,” Riess said.

Sure. Because if you can’t get a fair shake from your bank, who can you turn to?

A bill for a bill

Speaking of warm customer relations, our friends at T-Mobile are notifying wireless customers that if they want to receive a monthly bill in the mail, it could cost them almost $3.50.

That’s $1.50 a month for a mere summary of phone charges, and an additional $1.99 for a detailed account of all calls made and all charges.

That comes to $3.49 monthly or nearly $42 a year — just to receive your bill.

A T-Mobile spokeswoman said the fee was levied “after considering a number of factors, including rising costs for paper, printing and postage, as well as environmental impacts associated with printing paper bills.”

Neither Verizon Wireless nor AT&T Wireless hits customers with an additional charge for receiving bills by mail.

Let’s be clear: Saving trees is a good thing. And it’s good for businesses and their customers to be environmentally conscious. Paperless billing is terrific — as long as it’s something you want.

But those who, for whatever reason, are more comfortable with paper bills shouldn’t be punished for their preference.

Moreover, such fees disproportionately fall on senior citizens and lower-income people — those who may not have regular access to the Internet.

Sherman Oaks resident Margery Pope, 72, said she’s open to paperless billing. But she resents being strong-armed into the decision by T-Mobile.

“It shouldn’t cost me extra to see what I’m being billed for,” Pope said. “It’s their job to let me know what I’m paying for.”

Maybe she should think about suing the company. Oh, wait — T-Mobile’s contract requires that customers submit to binding arbitration.

That might not sound like a huge increase, but for many who are carrying large balances and are tightly budgeted, it’s a severe and unexpected blow. Kay, of Pottsville, Pennsylvania, said she contacted Chase and was told the change in policy was related to the poor economy.

“I was told I could possibly re-negiotate a lesser monthly payment but my interest would go from 3.9 percent to 21.99 percent. I was told that out of over a billion credit card holders 850,000 were effected by this change,” she told Consumeraffairs.com. “My monthly payment from my four accounts will go from $961.00 a month to $2394.00 a month. Needless to say I will not be able to make these payments and will end up defaulting on my accounts and probably claim bankruptcy.”

The change in minimum payment has little to do with how long customers have been Chase cardholders, or their credit ratings, though in an analysis of complaints to Consumeraffairs.com in the last few days, many customers do seem to have one thing in common. They all mention that they took advantage of a previous promotion and signed up for a Chase credit card, with the promise of a low, fixed rate for an extended period of time.

“In the past year I took advantage of balance transfer offers with their life-of-the-loan low interest rate offers of 5.99 and 6.99,” Wendy, of Cardiff By The Sea, California, told Consumeraffairs.com. “I basically used the card as debt consolidation this year in lieu of the economy, wanting to close some other accounts and just use the Chase card to pay this amount down. I am horrified at the new five percent minimum! This will increase my payment by about $475 a month.”

Dana of Dacula, Georgia, also took advantage of the promotion and transferred money to a Chase account at 4.9 percent. In August her minimum monthly payment goes from two percent to five percent.

“This could put me in default since it would cause my payment to more than double each month,” she told Consumeraffairs.com. “I do not want to use the card, I just want to pay it with the terms I agreed to when the card was issued.”

With new credit card rules on the way, thanks to changes by regulators and legislation passed by Congress, lenders are preparing for a new consumer lending environment. By increasing its minimum monthly payment for customers with low, fixed interest rates, Chase recovers that low-interest money faster, and can loan it out again at much higher rates.

The new credit card rules that go into effect next year prevent lenders from arbitrarily raising interest rates, but do not address the issue of minimum monthly payments. In fact, regulators in the past have encouraged lenders to increase the minimum payments, so that consumers pay down their balances faster.

But a number of consumers who thought they were doing the smart thing — transferring large balances to cards with locked in, low rates, are finding themselves in a trap. The increased minimum payment is now unaffordable. The price of keeping their payment the same is to give up that promised low rate, so that more of their monthly payment goes to interest each month, not paying down the principal.

My question is…is there a way to avoid the IRS coming at me for the difference. We are in pretty much an insolvent situation where we also owe the IRS over $20000 and our home is close to being upside down.

They are offering $8900.00 pay able in 3 months which will be extremely difficult to achieve. We could do $5000 if I borrowed from a relative. Any tips and/or advice would be greatly appreciated………Your site was recommended to me by a friend that used it to her great satisfaction

Jon

——-

Hello Jon,

Look into the insolvency exclusion to debt forgiveness which involves filing form 982 with the IRS.  Or, perhaps if you can prove insolvency to B of A, they may not issue a 1099 for the difference.

You write: “is there a way to avoid the IRS coming at me for the difference”

The answer is ‘yes’ if the consumer is insolvent or to the degree that the consumer is insolvent.

Thanks for the questions and hope this helps.

Paul

This author is not a tax advisor and this information should not be considered tax advice.  Please consult a qualified tax advisor for tax advice.